IPR Conference 2006 London

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Bernard Lewis
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1 IPR Conference 2006 London An economic analysis of the rise of service marks Andrea Mangani Department of Economics University of Pisa Italy

2 OUTLINE Functions of trademarks: economic rationale and history The rise of service marks: economic factors Some basic empirical observations Discussion and conclusion

3 Economic functions of trademarks and trademark protection: Reduction of consumers search costs Constant (not necessarily high) quality of products [ well-known marks: protection even without a risk of confusion] This theoretical framework concerning trademarks and trademark laws has been elaborated primarily in relation to the trade of goods, because Traditional economic analysis regards goods Diffusion of trademarks and evolution of trademark laws Wilkins (1992, BH): the development of big modern US corporations during the nineteenth century led to greater attention to brand names Large dimensions: economies of scale and scope Separation of producer and consumer through a distribution chain The reputation of the seller and the quality of goods could no longer be ascertained through the intimacy of buyer and seller The name and reputation become intangible property rights that require legal support

4 Is Wilkins explanation appropriate for services? In most services, the relationship between buyer and seller is a direct one; less attention to brand names Financial services Medical services Legal services Temporary accommodation Etc Actually, services account for only 30-40% of total trademark applications in advanced countries Counter-argument. Services are often described as experience (and credence) goods: the more difficult it is to ascertain the quality of goods and services, the higher the recourse will be to trademarks

7 Factors responsible for the rising importance of service trademarks Structural change Tradability of services (developments in technology, computerised information processing systems, telecommunications, transportation, Internet) Decline of human intermediation in many services Liberalisation of markets and privatisations: telecommunications, media markets, education, post and transportation Product quality competition: service differentiation, pre and post-sale services (Easy of imitation: are services more easily imitable than goods?)

8 Although growing, the share of services in total applications seems quite low (share of services in the 2001 GDP: 47% in LI countries, 55% in MI countries, and 71% in HI countries) possible explanations (and replies): Figure 1 concern all countries which presented trademark applications in the years under review, but the most active countries in trademarking are the most advanced ones services account for only about 25% of total world trade, but services hold a minority position in national trademark applications too imports of services in 2004 accounted, respectively, for 8% and 8.5% of the GDP of the 25 member states, but many European firms are likely to consider the community trademark as somewhere in the middle between a national and an international trademark companies customize (differentiate) their services to the needs of a specific client, rather than formally distinguishing them through the creation of different trademarks

10 Other issues and future research: Where human intermediation is still important? Market structure and trademarks Impact of institutions, R&D activities and foreign direct investments Classification system

AN ECONOMIC ANALYSIS OF THE RISE OF SERVICE MARKS. Andrea Mangàni Department of Economics University of Pisa Via Serafini Pisa Italy

AN ECONOMIC ANALYSIS OF THE RISE OF SERVICE MARKS Andrea Mangàni Department of Economics University of Pisa Via Serafini 3 56126 Pisa Italy Abstract. This paper claims that the structural and competitive